HONG KONG--(BUSINESS WIRE)--A.M. Best has assigned a financial strength rating of A- (Excellent) and issuer credit rating of “a-” to The People’s Insurance Company of China (Hong Kong), Limited (PICC HK) (Hong Kong). The outlook assigned to both ratings is stable.
The assigned ratings reflect PICC HK’s track record of favorable operating performance and adequate risk-adjusted capitalization. The ratings also reflect the business and capital support PICC HK receives from its parent company, The People’s Insurance Company (Group) of China Limited (PICC Group). The company is 75% owned by PICC Group.
As the sole overseas insurance subsidiary of PICC Group, PICC HK is important to the group's long-term overseas development. Since 2010, the company has engaged in inward treaty business with its affiliated company, PICC Property and Casualty Company Limited (PICC P&C), which benefits PICC HK in terms of business scale and operating profitability. In addition, PICC HK received a capital injection of HKD 160 million in 2013 from its shareholders to support long-term business growth and solvency. This capital injection also materially strengthened the company’s risk-adjusted capitalization over the medium term.
Partially offsetting these positive factors are the company’s relatively high operating expense ratio, high investment risk profile and its small market presence within the competitive non-life insurance market in Hong Kong. A high portion of invested assets are allocated to equities and non-investment grade bonds, which can result in potential earnings and capital volatility. However, A.M. Best's concern on the investment risk is somewhat mitigated by PICC HK’s track record of favorable investment performance over the past few years.
While PICC HK is well positioned at its current ratings, positive rating movement is unlikely in the near term. Negative rating actions may occur if PICC HK’s risk-adjusted capitalization or operating performance significantly deteriorates. A reduced level of support from PICC Group, or if the credit profile of PICC Group deteriorates, also would exert negative rating pressure.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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